BAKKT is a platform of the IFUS or ICE Futures US group, which is a subsidiary of the Intercontinental Exchange (ICE). The group owns and runs the New York Stock Exchange. The channel aims to offer the first physically-settled Bitcoin futures in the United States. This means that you’ll receive actual BTC, not the fiat equivalent of its value or price.
Cryptocurrency is intangible, digital assets that run on peer-to-peer transactions instead of having a centralized governing body operating the system. BAKKT, which was announced last year, is believed to be a huge catalyst for crypto markets and lend some stability to the otherwise volatile nature of Bitcoin and other cryptocurrencies.
A Closer Look at BAKKT
The platform will be taking advantage of Microsoft’s cloud technology to create a regulated yet open ecosystem for digital assets. With this, individual entities and organizations can trade, store, and spend cryptocurrency in a global network.
BAKKT’s most notable feature is its “physical” Bitcoin futures contract, which promises to deliver the digital funds on a specific date. Other platforms, like Coinbase or Bitcoin Evolution, settle your transactions the same way you started investing in them – by depositing fiat money or cash in your account that’s equivalent to the amount you’ve earned. While this process quickly allows you to withdraw your investments when you want to, it can lead to more substantial profit loss when trading due to the exchange rates.
BAKKT is backed by major corporations, such as Microsoft, Starbucks, and the Boston Consulting Group (BCG). These conglomerates are working on the project together to share their expertise in risk management and consumer experience.
Key Factors to Know about BAKKT
1. Trading Contracts
BAKKT has two primary contracts that’ll be listed for trading on IFUS. The first one is BAKKT Bitcoin (USD) Daily Futures, which is settled daily. Eligible contract dates are Exchange Business Days recognized by commercial banks in New York and delivery comes a day after the contract date.
The second contract is the BAKKT Bitcoin (USD) Monthly Futures. It’s delivered once a month, every third Friday of the contract month.
The contracts are regulated according to the standards of the US Commodity Futures Trading Commission (CFTC). The BAKKT Warehouse, which delivers the Bitcoins you earned after trading with the company’s daily and monthly futures, is awaiting approval for monitoring by the New York State Department of Financial Services.
2. Testing and Launch
User Acceptance Testing (UAT) has begun on July 22, 2019. Participants from all over the world have joined the project for daily and monthly contracts. The clearing and delivery features are available at this phase along with access to the BAKKT warehouse. The company deposited test tokens to facilitate test delivery processes.
The public launch, according to Investopedia, is reportedly on December 12. However, it’s still unsure whether it’ll push through this year because the company is still working on securing the required approvals for finalizing the project.
3. Block Minimums and Spread Trading
There’s a minimum block trade, which is ten contracts. With this, you can do this type of trading for all listed in the monthly futures category.
For the daily futures contract, here are the spread combinations that support spread trading:
- Spot /1 Week
- Spot /2 Week
- Spot /3 Week
- Spot /1 Month
- Spot /2 Month
The spread convention involves the buy order, which is when you purchase the far month and sell the near month, as well as the sell order where you put your digital assets for sale in the far month and acquire the near month.
For spread costs, the company also adds an exchange-calculated “anchor price” at the nearest trade time. The discrepancy between the value of the near month and the executed spread price will be carried over to the far month.
4. Trading Hours
Unlike peer-to-peer cryptocurrency trading, BAKKT has set trading hours, which are from 8 pm Eastern Prevailing Time (EPT) to 6 pm EPT, Sunday to Friday. This is equivalent to 1 am to 11 pm in London, and 8 am to 6 am in Singapore.
Since it’s still in its initial stage, BAKKT has waived all transaction fees until December 31, 2019. By next year, the following fees will apply:
- Exchange and Clearing Fee (Screen Trades) – The cost for each daily future contract under this category is 1 USD while you’ll be charged with 1.25 USD per monthly future contract.
- Exchange and Clearing Fee (EFP & Block Trades) – The daily futures fee is at 1.60 USD with an additional .25 USD for monthly futures.
- Delivery Fee – BAKKT charges a hefty delivery fee at 9.75 USD per contract for both types of futures.
You’ll need to work with a Futures Commission Merchant (FCM), who needs to be a clearing member of the ICE Clear US (ICUS) before you can trade on the platform. They’ll also process the daily and monthly futures.
How BAKKT Will Change the Industry
There’s a mix of people who are excited for BAKKT and those who await it with skepticism. The platform promises to make crypto assets trading safe, simple, and efficient. Physically-settled futures contracts are expected to lead to more Bitcoins entering the system, which makes investors eager to see the project come to fruition.
For users, BAKKT management has guaranteed that your crypto assets will be protected with the physical and cybersecurity measures they’ve set in place. Your digital funds will also be backed by insurance and stored in cold storage wallets as a safeguard against crypto scams and hacks.
Moreover, the platform may be one of the means of transforming cryptocurrency into more than just speculative assets and an effective medium-of-exchange. If all goes according to BAKKT’s vision, you can also expect more merchants to accept Bitcoins and altcoins as payment methods in exchange for their products and services.
BAKKT is an exciting venture by the ICE group. They aim to elevate the status of cryptocurrency into an accepted medium-of-exchange all over the world by regulating it and ensuring that users’ assets are protected by top-of-the-line cybersecurity technology.